Gas and Oil supplies

Watcher48 · #1 02/13/09, 09:25 PM

The guys were talkin about gas and oil supplies tonight. It seems that with the fall of oil prices that the oil companies can't do business. There is "prophecy" that supplies of gas and oil are gonna tank. Companies are cutting back on refining and supplies are already tight. Plus we have the spring change over (totally stupid). We could be looking at 200.00 oil again in the not to far off future.
maybe Texican can chime in.

7.62mmFMJ · #2 02/13/09, 10:57 PM

There were concerns this morning about the abrupt rise in futures for March and April.

Whipsaw they said.

Futures out to summer look to be doubled ($35 vs $70)

countrymech · #3 02/14/09, 12:03 AM

Shortages? Supplies are tight? I don't know where that came from, last I knew supply was out pacing demand. As far as the pricing goes, that it controled by the middle man. The markets set the price. We "nominate" whatever we can as for production and then we are told what we will be paid for our production. All we do is put it in the pipe and we try very hard to operate within the design parameters of our facility. Moving production levels to far up or down plays havoc with equipment that is designed to run at a certain rate. We were selling gas at $2.00/gal long before we were selling gas at $4/gal and still made money. When the price skyrockets again, as they will, you can thank the energy traders and their speculation. Coincidentally, this is also the time of year when many refineries cut production for the fact that they are shutting down for planned outages. They schedule these outages for maintenance operations that can not be done while the facility is "on-line" in early spring when demand historically declines so that they may be back "on-line" at full rates by summer when demand increases. This nothing new, it happens every year. Speculators will try to capitalize on it though, anything that they can point to to create the illusion of a shortage and looky the price just went up.

Cash · #4 02/14/09, 12:51 PM

One effect of the current depression is that global demand has dropped for petroleum products, pushing out the speculators who were driving part of the price surge last year. Thus prices have plummeted. The low prices mean that new oilfield development projects that required a certain -- and higher -- oil price to be profitable are canceled or postponed, and production has been cut in fields where the lift price exceeds the income on a barrel of oil. That's probably what they were referring to about the oil companies not being able to do business.

postroad · #5 02/14/09, 01:00 PM

Remember those folks at the pumps praying for reduced gas prices? Surely demand destruction caused by a depression was not what they had in mind!

Oldcountryboy · #6 02/14/09, 03:40 PM

Quote:

Originally Posted by Watcher48

The guys were talkin about gas and oil supplies tonight. It seems that with the fall of oil prices that the oil companies can't do business. There is "prophecy" that supplies of gas and oil are gonna tank. Companies are cutting back on refining and supplies are already tight. Plus we have the spring change over (totally stupid). We could be looking at 200.00 oil again in the not to far off future.
maybe Texican can chime in.

Had on the evening news the other night that several gas stations have closed down in Tulsa, Oklahoma. These stations were franchises from a oil company up in the state of Kansas and the company has closed down and filed bankruptcy. All due to the economy.

This makes me wonder if there is more to come?

wendle · #7 02/14/09, 08:37 PM

If that isn't bad enough Illinois is raising the fuel tax by .08 per gallon to fund a $5.9 billion transportation repair plan, that includes school construction and road and mass transit projects(Wasn't this part of the stimulus ?).
http://www.wgntv.com/landing/?blockID=204009&feedID=209

I guess the lawmakers think we are all getting along just fine making ends meet in Illinois.

Watcher48 · #8 02/14/09, 08:50 PM

Quote:

Originally Posted by wendle

If that isn't bad enough Illinois is raising the fuel tax by .08 per gallon to fund a $5.9 billion transportation repair plan, that includes school construction and road and mass transit projects(Wasn't this part of the stimulus ?).
http://www.wgntv.com/landing/?blockID=204009&feedID=209

I guess the lawmakers think we are all getting along just fine making ends meet in Illinois.

What happened to the stimulus plan. I thought O-man had this all taken care of. Somebody must have put the shovel away

wendle · #9 02/14/09, 08:54 PM

Wasn't all that money supposed to come from the sky and nobody would ever have to pay it back?

fordy · #10 02/14/09, 11:11 PM

..................We have tremendous UNtapped quantities of natural gas trapped beds of shale rock . Thes are being developed at several different locations around the US ! Atleat 3 sites in tx , one in ark , pennsylvania , kansas , new york , and maybe some others not yet discovered . The ones here in north central texas I'm familiar with consume 2 million gallons of water and a half million pounds of frac sand before the well will produce commercial quantities of gas . , fordy

texican · #11 02/14/09, 11:16 PM

Simple economics.
When oil hit the 80's, oil and gas companies got interested in a lot of formations that weren't economical at '50'. When it hit 100, they started moving, getting landmen out in the courthouses, scouring for open leases. They could make money at 100. When it hit 140, there was zero room in the county clerk's offices... our local office put a huge sign up... no more than 50 people, as per the fire marshall's order {sheriff never was called, but many times a 100 people were in a room designed for 20}. The oil companies were throwing around money like drunken sailors, because they knew they could make it back.

When oil dropped like a rock, the oil companies had spent millions on leases, expecting to get their payback quickly... but with the drop in oil, they slashed their drilling plans.

At 100, you can produce an oil well that costs 50$/barrel to produce (just in raw development costs). With oil at ~40, and production costs at 50, it's wiser to just sit on these leases, hoping the price rebounds. Otherwise, you lose money on every barrel (or actually mostly gas in my area).

No business is going to last long buying high and selling low.

Smaller companies are still drilling. Big boys like Devon have written down billions in the last quarter (yes, omg, an oil company losing money!), and are curtailing drilling...to a point... they want to hold on to their drillers, so when things pick up, they'll have em under contract.

This scenario is exactly what happened in the 90's, when oil went down to 10$/barrel. The production costs exceeded the cost of oil, so tens of thousands of wells were permanently plugged, and forever taken out of production. My conspiratorial mind figures this is exactly what OPEC wanted.

Cheap oil is great, for consumers, in the short run. It's like crack though... you get hooked on the cheap stuff, not realizing that the cheap stuff will get you hooked on foreign suppliers... American fields (at least the new ones) cost more to produce. When the foreigners pull the strings, shutting off supplies, there's no magic valve to turn American production back on overnight... it takes months and months (of just paperwork to get started).

We have plenty of oil and gas.........as long as the world is in a depression... let the Chinese and Indians get out of this mess, and the prices will spiral again.

agree with countrymech... the traders speculations cause more price swings than anything else... and they get to keep their hands nice and clean...

postroad · #12 02/15/09, 02:32 PM

There is a theory that the prices where manipulated in the 90's to bankrupt the USSR.

Russia was getting pretty uppity again. Maybe this bullcarp economic situation is an attempt to bring them in line?

Hip_Shot_Hanna · #13 02/15/09, 05:05 PM

One thing i would like to add to Texicans post is that the oil exporting countries REALY LIKED $140 oil , they know they can get that price now , so all they are doing is to work out by how much they have to cut production to get $140 oil and how much better / worse off they will be selling lots of oil cheap compared to less oil expensive , IMHO it will be April when those figures come in .

Bettsann · #14 02/15/09, 11:10 PM

I read this article and came away disgusted. Crude oil is getting cheaper so why isn't gasoline.

http://finance.yahoo.com/news/Crude-...-14367525.html

If I read correctly foreign oil is now more expensive than Texas Crude. But our gasoline is made from foreign oil because no one thought to put in the pipe lines to ship the Texas crude to our own refineries. The reason given is that normally Texas crude is more expensive than foreign. Why are we not utilizing our own resourses. Can we not put people to work hauling the crude to refineries. Or is that to cost prohibitive. It looks to me that there are enough people looking for a job so what is wrong with driving a truck. Some of the oil is piped to refineries in the midwest. Can't they haul the gasoline to where the gasoline is needed.
If I am going to pay high prices then at least I would feel better about it knowing that someone here in America was feeding his family on the money.
If I am wrong about this would someone please feel free to correct me. Because my thought is that even if the cost of Texas crude goes up we ought to stick with it and support American business. Isn't that part of our problem, being a consumer and not a producer of our own goods.

texican · #15 02/15/09, 11:58 PM

Quote:

Originally Posted by Bettsann

I read this article and came away disgusted. Crude oil is getting cheaper so why isn't gasoline.

http://finance.yahoo.com/news/Crude-...-14367525.html

If I read correctly foreign oil is now more expensive than Texas Crude. But our gasoline is made from foreign oil because no one thought to put in the pipe lines to ship the Texas crude to our own refineries. The reason given is that normally Texas crude is more expensive than foreign. Why are we not utilizing our own resourses. Can we not put people to work hauling the crude to refineries. Or is that to cost prohibitive. It looks to me that there are enough people looking for a job so what is wrong with driving a truck. Some of the oil is piped to refineries in the midwest. Can't they haul the gasoline to where the gasoline is needed.
If I am going to pay high prices then at least I would feel better about it knowing that someone here in America was feeding his family on the money.
If I am wrong about this would someone please feel free to correct me. Because my thought is that even if the cost of Texas crude goes up we ought to stick with it and support American business. Isn't that part of our problem, being a consumer and not a producer of our own goods.

West Texas Crude is used as a benchmark. It's one of the easier to process crude oil varieties.... It is currently cheaper than foreign oil... but there's only so much of it produced... the vast majority of crude used in this country is foreign. If we had to depend on American crude only, we'd find out what rationing is like. Most folks would get to drive, maybe 5% of what they do now.

There's no conspiracy about the price drop in the 90's. It DID bankrupt thousands of small operators running stripper wells, in the state of Texas, alone. OPEC opened the spigots, shutting down marginal wells, knowing that they could recoup the costs later on, ten fold.